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There are many similarities between Bitcoin and stocks from the Dot-Com era. Right now new cryptocurrencies are being started every day on a hope that they will actually be used for some function. Yes, some of them did pan out, but the majority of them failed. The public, like today, was speculating and buying them pushing the price higher everyday, until the bubble burst. I have put together a string of charts below showing the similarities between the two eras see Figures Our fundamental approach to risk management and portfolio construction is as follows: It has been increasingly tougher to find bargain stocks.
However, we do feel that we have a solid portfolio of companies that are utterly misunderstood by the market, and while the price to intrinsic value correction inevitably takes time to play out — each one of our stocks has the potential to double in a couple years. We track cash flows and are not market speculators; we work hard to understand businesses and management teams that are apt to create significant value for our clients.
For some people the concept of intrinsic value is such a hard concept to grasp, but for most value investors it's something you just "get". Its hard for me to understand why anyone would want to invest in the stock market other than using fundamentals and the concept of intrinsic value.
If you're an entrepreneur and you are thinking of buying a small business, you are probably going to get a look at the "books" of the business, i. The example I just explained above happens every day in the stock market. Think of the stock market as the original business owner or as we value investors call him, "Mr. Everyday he comes to you to buy or sell your shares at the quoted price; you can choose to ignore him or take his offer. At times you will laugh at the value he places on his business and choose to ignore him, and at other times you will think to yourself, "what is he thinking?
At those times it is great to be a patient, disciplined value investor, because at those times you can capitalize on Mr. Market's quote and buy a good business at a great price with a built in "margin of safety". The figure below illustrates this concept, and it is one all value investors subscribe to--like I said earlier you either get this example, or you don't.
Or in the case of the bitcoin, you just hope that the price goes up and that its worth more in the future than it is today. Now tell me how would you choose to invest your money? There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California.
The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, 'You don't understand.
These are not eating sardines, they are trading sardines. But essentially it is speculating, not investing. You may find a buyer at a higher price — a greater fool — or you may not, in which case you yourself are the greater fool.